Consumer Financial Protection Bureau Director Richard Cordray
delivered remarks outlining an important new direction on how the CFPB
intends to proceed in developing rules to govern the debt collection
market during today’s Consumer Advisory Board meeting in Washington,
D.C. Specifically, Director Cordray stated that after considering the
feedback received on the third-party Debt Collection Outline of
Proposals Under Consideration released in July 2016, the CFPB has
decided that the substantiation aspect of the rulemaking, i.e. the
proposals related to ensuring debt collectors are collecting the right
amount from the right consumer, is best handled by hearing from first
and third parties at the same time.
“As we evaluated the feedback we received on the proposals under
consideration, one thing became clear. Writing rules to make sure debt
collectors have the right information about their debts is best handled
by considering solutions from first-party creditors and third-party
collectors at the same time … All of these parties must work together to
ensure they are collecting the right amount of debt from the right
consumer. But breaking the different aspects of the informational issues
into pieces in two distinct rules was shaping up to be troublesome in
various ways,” stated Director Cordray.
To implement this change, Director Cordray announced that the CFPB
will consolidate all of the “intertwined” substantiation issues in a
separate first-party creditors’ rule so that the CFPB can address the
“entire set of considerations market-wide.” According to Director
Cordray, this decision will allow the CFPB to move forward more quickly
on other aspects of the third-party debt collection rulemaking. This
means the CFPB will now be focusing its third-party rulemaking efforts
in the near term on rules to ensure that consumers understand their
rights, e.g. through improved disclosures, and rules to ensure that
consumers are treated with respect, especially when it comes to
communications with debt collectors.
Director Cordray’s announcement marks a critically important change
that is essential to improve the debt collection rulemaking process and
one that ACA International has been very strongly advocating for since
the CFPB released its Debt Collection Outline of Proposals. ACA has
consistently asserted that third-party debt collectors cannot assess the
CFPB’s substantiation proposals to provide meaningful input without
knowing how the CFPB intends to regulate first parties’ obligations. In
addition, first-party creditors possess information and data that is
central to the CFPB’s debt collection rulemaking that third parties
simply do not have.
This precise issue was also a main focal point of ACA members who
served as Small Entity Representatives (SERs) during the Small Business
Advocacy Review Panel that took place in August 2016 on the CFPB’s
proposals. Like ACA, the SERs strongly urged the CFPB to obtain joint
feedback from first and third parties on the proposals, stressing that
successful debt collection practices rely upon communications between
the first-party small businesses who have outstanding accounts
receivable and small third-party debt collection agencies hired to
collect the owed debt.
Given these issues, ACA is pleased that the CFPB has listened to the
concerns of the debt collection industry in this regard, seems to
possess a better understanding of the inextricably-linked relationship
between first and third parties when it comes to substantiation, and has
made the decision to handle this aspect of any new debt collection
rules simultaneously. ACA will continue its advocacy efforts to ensure
that the CFPB takes any additional steps to adjust its rulemaking
process to reflect the operational realities of the debt collection
industry as part of its larger strategy to advocate for fair, balanced,
and well-reasoned debt collection rules.
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